Reliance considers buying 40 per cent stake in MTN - Examining viable alternatives

By Harsha Pramod @ Thursday, July 03, 2008 10:06 AM

Section - Business/Financials

Reliance Communications (RCOM), owned by Anil Ambani, is considering various options to buy a 40 per cent stake in MTN, reported the Economic Times.

RCOM would emerge as the single largest stakeholder in MTN if its plans to buy a significant equity stake in association with a sovereign wealth fund from the Middle East materialise. Through this, RCom hopes to evade any legal hassles caused by Mukesh Ambani-owned Reliance Industries’ (RIL's) contention that the company has right of first refusal in the case of a reverse merger with MTN.

Following the reverse merger, MTN would have proposed an open bid for RCOM. Subsequently, a share swap would have taken place between Reliance Anil Dhirubhai Ambani Group (ADAG), promoters of RCOM, and MTN. As a result, ADAG would then have become the single largest shareholder of MTN even as RCOM became a subsidiary of MTN.

Although RCOM is still considering this plan, it is also considering the option of directly buying a 40 per cent stake in MTN. According to the South African Stock Exchange rules, an acquirer is required to launch a tender offer if the investment is more than 35 per cent of a company. RCOM therefore plans to buy a lower number of shares than the specified limit. RCOM also has plans to reverse the procedure that requires MTN’s stakeholders to vote to give up their claim to a tender offer. X